In Uncategorized on 10/10/2017 at 23:23

The Cahn – Van Heusen chanson gives me my title for the first of the three (count ‘em, three) full-dress T. C.s that the Glasshouse Gang unloaded on me while I was away from the wordprocessor.

Creditguard of America, Inc., 149 T. C. 17, filed 10/10/17, admits they owe the $216K deficiency for the year at issue. But IRS yanked their tax-exempt status ten years later, and wants interest for the whole ten years.

The Creditguards claim they only owe from the date of yank. They couldn’t have paid the tax for the year at issue when due, because they were still exempt, as far as they knew. Or anybody else knew, until IRS yanked their tax-exempt status.

Well, that cuts no ice for The Counterfactual King, Judge Lauber.

“To be sure, ‘until we devise time machines, a change can have its effects only in the future. Bergerco Can. v. U.S. Treasury Dep’t, Office of Foreign Assets Control, 129 F.3d 189, 192 (D.C. Cir. 1997). But the purpose of making a change retroactive is to suspend reality and invoke a counterfactual premise. Here, the premise is that petitioner was not in fact tax exempt during [year at issue] but rather was a corporation subject to the regular corporate income tax. Because petitioner did not actually pay that tax on the date prescribed for payment, it is liable for interest beginning on that date.” 149 T. C. 19, at pp. 13-14.

“Underpayment interest is designed to compensate the Government for the period during which the taxpayer has enjoyed use of the Government’s money. ‘Interest, in tax cases as in others, is merely compensatory; it is not a penalty.’ Vick v. Phinney, 414 F.2d 444, 448 (5th Cir. 1969). Under this use-of-funds rationale, ‘a taxpayer who initially failed to satisfy his tax liability is obligated to pay interest on the taxes due from the date the tax return should have been filed, regardless of whether the failure to pay resulted from the taxpayer’s miscalculation or the [G]overnment’s redetermination.’ Brookhurst, Inc. v. United States, 931 F.2d 554, 558 (9th Cir. 1991).” 149 T. C. 17, at p. 15.

Bottom line: The Creditguards had the money. The fisc didn’t. That means interest is due. All the way.

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